S&P500 (SPX) Price Analysis – Aug 08, 2023

Daily Price Outlook

The global market sentiment failed to prolong its upward momentum and turned sluggish, fading the cautious optimism that started the week. People are now eagerly awaiting second-tier economic data from both China and the US, which is scheduled for release on Tuesday. This uncertainty comes as major central bankers send mixed signals. Additionally, there is a lack of significant data or events on the horizon until the US inflation report is published on Thursday.

It is worth noting that the S&P500 Futures, which represent how investors feel about the stock market, show slight losses around 4,530. This is a retreat from Friday's monthly low after a small gain on Monday. Meanwhile, the yields on US Treasury bonds, both the 10-year and two-year bonds, are under pressure, hovering around 4.06% and 4.76%, respectively. It's worth noting that Wall Street managed to break its five-day streak of losses on Monday, ending the day with a modest gain.

Market Dynamics: USD Strength, Gold and Oil Weakness, Mixed Central Bank Signals

The US Dollar Index (DXY) has climbed above 102.00, while Gold and Crude Oil prices are showing weakness, both down by 0.20% and 0.50% respectively. However, the uncertainty has been fueled by mixed statements from important central banks like the Federal Reserve (Fed), Bank of England (BoE), Bank of Japan (BoJ), and European Central Bank (ECB).

Fed Governor Michelle Bowman has indicated that more interest rate hikes might be necessary to manage inflation. On the flip side, New York Fed President John C. Williams has suggested that interest rates could decrease next year. Williams has also expressed a desire for a slightly higher unemployment rate as the economy cools down.

European Central Bank and Global Central Bank Insights Impacting Markets

Furthermore, the European Central Bank (ECB) has been in the spotlight due to discussions about high interest rates, sparked by Fitch Ratings, a global rating agency. This caused a dip in the Euro's value, as Fitch mentioned that the possibility of low inflation could lead to a pause in the ECB's rate increases. The ECB itself also noted that the period of highest underlying inflation likely occurred in the first half of 2023.

Meanwhile, Huw Pill, the Chief Economist of the Bank of England, outlined two potential risks for inflation in the United Kingdom. All of these recent events and statements are actively shaping the current financial landscape.

Upcoming Trade Figures and CPI Data: Market Impact Anticipated

Looking ahead, the focus will be on trade data from both China and the US today. However, the China Consumer Price Index (CPI) on Wednesday and the US CPI on Thursday will be crucial for traders seeking clear direction. These events will likely have a major impact on the markets.

S&P500 (SPX) - Technical Analysis

Examining the technical aspect of the S&P 500, its current trading stance centers around the 4475 support threshold. This support is further fortified by the 61.8% Fibonacci retracement level. However, it's important to acknowledge that both the relative strength index (RSI) and the moving average convergence and divergence (MACD) indicator are signaling bearish conditions, implying a significant likelihood of a downward correction.

At present, the immediate support is provided by the 61.8% retracement level and the 50-day exponential moving average, situated at 4475. Should the price undergo a bearish breach beneath this level, the next potential support lies around 4435.

Conversely, an optimistic scenario entails a breakout above the 4530 resistance level, which could pave the way for the S&P 500 index to target the resistance levels at 4560 or 4600.

For traders, vigilant monitoring of the 4500 level is imperative. This juncture presents a prospective selling opportunity in the event of a bearish breakdown, while a sustained support might indicate a favorable buying opportunity.